However, directors raised the interim
dividend by 0.25 cents to 7.5 cents per share, fully
imputed, saying the New Zealand economy was “showing signs
of a good recovery and in this environment Vector should
continue to prosper.”

For the full year, Vector
“continues to target” earnings before interest, tax,
depreciation and amortisation in line with market consensus
estimates, “assisted by our focus on growth in our
technology business and continued tight cost
control.”

“Vector has implemented and weathered
regulatory price resets,” said chief executive Simon
Mackenzie said in a statement to the NZX. “These, along
with production constraints at the Kapuni gas field and the
end of our entitlements to Kapuni gas at legacy prices have
weighed on our financial results in the last six
months.”

Revenue for the half year totalled $657.9
million, down 1.7 percent on the same period last year, with
the only area of revenue and earnings growth being the
company’s unregulated telecommunications
segment.

Adjusted EBITDA, a measure that subtracts one-off
items to allow better comparative performance figures, fell
5.5 percent to $317.8 million, compared to the first six
months of the previous financial year. Operating cashflows
were 15.6 percent lower at $225.9 million.

While Vector
had implemented mandated cuts to its electricity and gas
network charges, the company remained unhappy with both the
uncertainty in the regulatory environment and its belief
that consumers “do not appear to be benefitting from the
price reductions Vector has made.”

Meridian Energy was
the only electricity retailer to explicitly pass through the
price cuts.

Vector’s loss in lasts year’s High
Court merits review challenge to the Commerce Commission’s
price-setting methodology had left an “unworkable”
policy framework.

“The court said the alternative
approaches proposed by Vector and others did not provide a
‘materially better’ outcome than the commission’s
approach,” said Mackenzie. “It is now evident that the
‘materially better’ test is unworkable.”

The ruling
gave the commission “wide discretion over the conduct of
New Zealand’s critical infrastructure, but it gives no
guidance to how the test of ‘materially better’ can be
assessed robustly.

“The country’s infrastructure
providers are deprived of an effective process to challenge
the regulator’s determinations.”

Now that the Major
Electricity Users Group was planning to appeal elements of
the High Court’s findings, Vector was considering whether
to cross-appeal, having previously decided not to initiate
an appeal.

During the period, electricity network revenues
fell 2.5 percent to $326.4 million to render EBITDA 5.3
percent lower than the prior comparable period, at $191.3
million.

Gas network revenues were off 7.8 percent at
$105.5 million and EBITDA in the segment fell 12.1 percent
to $78 million. Gas sales revenue of $184.7 million was
down 5.5 percent, with the impact of higher average gas
prices pulled down EBITDA in the segment by 26.2 percent to
$25.1 million.

“Over the long
term, our focus on the opportunities emerging from the
convergence of infrastructure management technology and
information technology will position us well,” said
Mackenzie.

“The balance of power is shifting from
utility service providers to consumers as technology allows
customers to switch suppliers, switch energy solutions and
switch from the grid.”

Increasing uptake of off-grid
alternative power sources was increasing, and if trends such
as rooftop solar electricity production grew strongly,
Vector may have to invest in managing two-way power
flows.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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